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Posted: March 12, 2008

Altairnano Reports Fiscal Year 2007 Results

(Nanowerk News) Altair Nanotechnologies Inc. (Altairnano), a leading provider of advanced nanomaterials technology for use in energy, pharmaceutical, life sciences and industrial applications, today reported financial results for the fiscal year ended December 31, 2007.

For the year ended December 31, 2007, the company reported revenues of $9.11 million as compared with $4.32 million for 2006. The net loss for 2007 was $31.47 million, or 45 cents per share, compared with a net loss of $17.20 million, or 29 cents per share, for the prior year period.

Altairnano’s 2007 financial statements include accounting adjustments for events occurring subsequent to year end totaling $6.78 million. These one-time operating expenses are related to a recently discovered module configuration problem that creates a potential overheating risk in first-generation (Gen 1) battery packs sold to Phoenix Motor Cars, Inc. (Phoenix), an electric vehicle manufacturer. The risk arises from the manner in which individual cells were assembled into battery modules, and is not related in any way to the company’s proprietary lithium titanate-based cell technology.

At year’s end, cash totaled $50.15 million. The company’s investment in auction rate notes, totaling $3.91 million, was reclassified from a current to long-term asset due to current market conditions that have resulted in the absence of auctions. Based upon management evaluation of the notes and the underlying collateral, the company determined that the investment securities were not impaired.

The company also disclosed that, in early January 2008, the Board of Directors granted a bonus of approximately $715,000 in a combination of stock and cash to its former Chief Executive Officer Alan J. Gotcher, who agreed to resign February 26. Of the $715,000 bonus payment, approximately $400,000 represents an amount in excess of the amount calculated under the company’s existing bonus guidelines. According to Board Chairman Jon Bengtson, the Compensation Committee of the Board is initiating an inquiry into the circumstances under which the bonus was granted and reserves the right to take any appropriate action indicated at the close of the inquiry.

Potential Module Configuration Issue Uncovered by Company

The potential module configuration issue, which has never resulted in an adverse incident with any Altairnano battery modules, was discovered by Altairnano researchers in the course of an exhaustive testing and computer modeling process to investigate possible modes of potential failure in Altairnano batteries. Their analysis revealed that, under certain very rare circumstances, a battery module, as configured for use in Phoenix vehicles, might overheat and fail.

“Although no adverse events have resulted from this identified module configuration issue, and the possibility that a failure might occur is very small, we concluded that warranty replacement of all affected battery packs was the right thing to do, despite the substantial cost involved,” said Terry M. Copeland, interim president.

“The warranty replacement is not the result of any concerns with the safety of our proprietary lithium titanate cell technology, which we continue to believe is the best and safest lithium battery technology available today,” Mr. Copeland added. “The long-term prospects for Altairnano batteries remain excellent, although the introduction of vehicle batteries into the marketplace has been delayed by this recently identified module configuration issue.”

The company said that only the first-generation electric automobile battery modules for Phoenix vehicles are affected. “Battery modules for stationary applications are of a completely different design and are not impacted by this issue,” Mr. Copeland said.

The company has substantially completed the modeling and the redesign of a second-generation battery pack. Once testing and computer modeling confirm that the revised module design resolves the potential overheating issue, Altairnano expects to begin delivering second-generation battery packs to Phoenix.

The accounting adjustment includes three subsequent-event charges, all reflected in the company’s fourth quarter financial statements:

A $2.86 million warranty credit to Phoenix that will be applied to engineering of Gen 2 battery packs for Phoenix production of some Gen 2 replacement battery packs.

$0.82 million charge for Gen 1 battery modules that were in Altairnano’s inventory at the end of the fourth quarter, intended to be shipped to Phoenix.

$3.10 million charge for battery cells that were in inventory at year end or committed for receipt in 2008 and intended to be assembled into battery modules that would be used to assemble Gen 1 battery packs for Phoenix.

The company said that, since the safety of the individual battery cells is not in question, it may ultimately be able to reconfigure the affected battery modules for future sale in other products. However, because of uncertainty about the probability and timing of future sales, the company has determined that the entire cost of the individual cells should be treated as a cost of sale expense at this time. The decision to replace the battery packs under warranty provisions was made after year end; however, because the condition existed prior to year end 2007, the financial statements reflect the resulting adjustments accordingly.

AES Program Moves Forward

The company said that, as expected, two one-megawatt stationary battery packs developed with and purchased by AES Corporation have been connected to the electric grid at an AES subsidiary and full testing has commenced. The stationary battery packs are part of a suite of energy storage solutions to be developed specifically for AES. AES has told the company that it sees numerous potential applications for the technology, which it expects to pursue, assuming the successful testing of the development project.

Increased Operating Expenses

Operating expenses of $42.18 million for 2007 were $20.17 million greater than operating expenses of $22.01 million for 2006. Cash used in operations was $17.9 million in 2007 as compared to $14.4 million in 2006. Increased operating expenses were due to subsequent event non-cash adjustments to cost of sales for warranty expenses and inventory impairment totaling $6.78 million. In addition, operating expenses increased due to greater research and development efforts by approximately $5.37 million, largely for staffing and other expenditures related to battery development. General and administrative expenses increased by approximately $3.28 million due primarily to share-based compensation expense, a non-cash item, which increased by approximately $1.88 million.

Private Equity Placement

As previously reported, Altairnano strengthened its balance sheet during the fourth quarter with a $40 million private placement of its common stock to Al Yousuf LLC. As a result, Altairnano’s cash at December 31, 2007, totaled $50.15 million at year end. A placement fee of $2.38 million remained unpaid at year end and was paid during January 2008.

Please join a conference call with Altairnano’s management team today at 11 a.m. EDT to update the company’s financial results and principal business developments. The dial-in number for both U.S. and international callers is 719-325-4884. Please dial into the conference five minutes before the call is scheduled to begin and ask the operator for the Altair Nanotechnologies call. An audio replay of the conference call will be available from 2:00 p.m. March 12 through 11:59 p.m. EDT, March 19, 2008, and can be accessed by dialing 719-457-0820 and entering conference number 3564615.

Additionally, the conference call is being web cast and can be accessed by visiting Altairnano's web site at www.altairnano.com.

About Altair Nanotechnologies Inc.

Altairnano is an innovator and supplier of advanced novel, ceramic nanomaterials. A seasoned management team complements Altairnano's leading edge scientists, with substantial experience in commercializing innovative, disruptive technologies. The company has developed nanomaterials for the alternative energy, life sciences and performance materials markets based on its proprietary manufacturing process. This process also provides the foundation for its innovative AHP pigment process. For more information visit www.altairnano.com.